E-mail, Feeds, 'n' Stuff

Tuesday, August 5, 2008

Bumpy road continues at OnPoint

Since late last winter, we have been reporting on the financial results of OnPoint Community Credit Union based in Portland. We are not really competent to judge the significance of all the data contained in that institution's financial statements, but we have been blogging about them here for a number of reasons. First, it's a Portland-centric money house, and so it might be seen as some indicator of how things are going in the local economy. Second, we've got a little bit of money parked there, as a long-time member. Third, we never see anyone else report about OnPoint's quarterly results, which is always a little disconcerting. And last but not least, the management over there is not real open with the nitty-gritty numbers; you won't find much hard data on its website, even if you look hard.

And so here we go with another quarter's worth, as of June 30, 2008. The full Excel file of what OnPoint reported to the National Credit Union Administration, a federal agency, is here. And here are some of the line items we've picked out that seemed interesting to our relatively untrained eye. If nothing else, they confirm the trend of ever-increasing loan delinquency:

Item

9/30/07

3/31/08

6/30/08

Q'ly increase

9-mo. increase

Total investments

$239,660,803

$266,999,202

$298,019,625

11.6%

24.4%

Federal agency securities

$97,766,028

$99,580,429

$153,595,595

54.2%

57.1%

Total reportable delinquency - total delinquent loans

$3,525,641

$7,289,749

$9,944,789

36.4%

182.1%

Total reportable delinquency - indirect lending

$1,659,211

$3,141,885

$3,736,341

18.9%

125.2%

Total outstanding loan balances subject to bankruptcies

$4,595,702

$2,047,768

$6,218,843

203.7%

35.3%

Ratio of delinquent loans to total loans

0.17

0.34

0.45

Ratio of total delinquent loans to net worth

1.56

3.05

4.09

Delinquent loans are those delinquent for two months or more.

Year-to-date net income for the quarter ended June 30 was $10,139,886, down 18.0% from the same quarter last year ($12,364,142). For the first time since we've been watching, deposits fell during the quarter, from $2,303,473,491 to $2,278,482,461 -- a 1.1% drop.

Comments (10)

Deposits at many banks have been falling for the past year or two. I think it has to do with the contraction in mortgage lending which tends to also get associated mortgage money deposits. That they are still turning a profit (net income), and enough to cover defaults, is pretty good. But this is only a partial picture, and what has been surprising in this current credit crisis is how long it has taken for banks to report losses. Live and learn. As an investor, I am left wondering are banks like airlines, to be traded but not held in the buy & hold fashion.

p.s. Onpoint should have kept its old name Portland Teacher's Credit Union. It was more wholesome sounding to me.

Interesting, too, that they've been buying up "federal agency securities". Wonder if those are Treasuries, something from the Federal Home Loan Bank system, or something from the Bernanke bailout bonanza. Perhaps a good sign, if they're stockpiling "safe" investments to counter losses in their mortgage book.

Credit union delinquency numbers historically run a small fraction of those run by for-profit financial institutions. Don't believe the reasons for this have actually been researched, but credit union advocates (e.g. myself) say it is due to knowing members better (better risk evaluation), member loyalty and respect for the cooperative nature of the institution.

Will look at their numbers and post again. Loan loss reserve to total capital is always interesting, as it is a better indication of what kind of hit management actually thinks they are going to take. Reporting of delinquencies is tightly regulated, so not always indicative. There is always some percentage of the over 60 days behind loans that management knows are going to be caught up or worked out without loss. Again, with CU's that number runs higher than at banks.

Let us raise a toast to the bright bulbs who got credit unions started. Imagine trying to create a financial services co-op today, if they didn't already exist. You would quickly see confirmation that de-regulation only applies to the for-profit corporations, and then only when they are making the bucks. What we have today is socialized corporate risk, and deregulated corporate profit.

What I gather from a green eye-shade examination of those numbers is that their loan losses are indeed increasing, as are losses on non-RE, non-plastic loans (i.e. auto, boat, RV). However, that has merely moved their loss ratios from damn good to very good. Bankruptcies are an issue, but that is a regional and national issue they can't be expected to escape. On the whole, my take is that the asset quality issue is a headache, but not more. Pass the Advil.

The numbers that would scare me are their decline in ROAA, from 1.07 in June07 to 0.79 in June08, and some of the paper they are holding, $92 million in mortgaged backed securities of fed agencies, and $36 million in CMO’s. Pass the Tums.

I work at 1st tech and DQ is an issue here too.
To figure out delinquency add total balances of ALL loans and credit cards and divide by total balances of all that are 60+ days behind. As you might guess higher balance loans affect the bottom line more when they go 60 days.

Many credit unions broadened their membership base and it increased delinquency.We got more people who had no real long-term relationship that they cared about protecting.

We had an issue with indirect auto loans (go to dealer pick a car sit in back office with finance guy get a stmt 2 weeks later from some bank/credit union you never heard of saying they carry your car note).

We bought too many of these loans & many went to 19 yr old kids with no credit history and no sense of responsiblity and we financed a 30 k Dodge Ram for them!

Mortgages are an issue not due to the number that are 60 days past due (we hold our notes and largely avoided the dodgy kind of deals that went on at places like Countrywide). However the balances are so high so they affect the bottom line more.

America just overextended itself on credit mortgages are one example; repos are going up-many of these people were behind on their car loans from the start. Many people took loans for gas guzzlers & now they can't afford the gas for their F-350 and they don't want to pay for a vehicle they aren't driving.

Road Work

Miles run year to date: 45
At this date last year: 117
Total run in 2016: 155
In 2015: 271
In 2014: 401
In 2013: 257
In 2012: 129
In 2011: 113
In 2010: 125
In 2009: 67
In 2008: 28
In 2007: 113
In 2006: 100
In 2005: 149
In 2004: 204
In 2003: 269